Reader Mailbag: Sad Letters

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What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Cheap diet dilemma
2. Support via gift card
3. Why cosigning is bad idea
4. Public domain books
5. Old floppy discs
6. Yard sale price disagreement
7. Loan to pay off debt
8. Life insurance and company failure
9. Figuring out my plan
10. Dating advice

My twice-weekly mailbag posts take me far longer to write and compile than any of my other articles.

It’s not the actual writing that takes so long, it’s reading through lots of emails, Facebook posts, and other material from readers.

Sometimes, I’ll read a long email from a reader who is in a painful situation that I feel completely unable to assist with. I feel strongly for that person and I simply need to step back and take a break.

I usually go on two or three walks while assembling a mailbag. The stories just get to me.

Q1: Cheap diet dilemma
here is my issue i am single so i don’t need to buy much food i am also trying to lose weight by eating health..on a budget..any ideas on what i can buy or make at home to help with this? i normally have free time to make stuff on the weekends, and in cooler months i make large batch’s of the breakfast burritos which is an idea i got off your site. i just don’t like heating my house up by cooking in the summer. cause i live in the south.

- Roger

I keep lots of fresh fruits and snackable vegetables on hand. I’ll buy whatever fruit is on sale (as well as bananas, which are always cheap) and keep them right out on the table so I can grab them.

With vegetables, I’ll buy whatever is on sale that can easily be turned into very simple meals or finger foods.

I am a huge fan of beans, so I often buy dried beans and cook them up to provide the backbone of a lot of my meals. They’re very cheap, too.

Those are my secrets – fresh produce on sale and lots of beans.

Q2: Support via gift card
Is it considered financial support if I give my son gift cards to help out with his groceries?

- Erica

Sure it is. You’re essentially giving him cash.

Think about it this way. If he uses a $50 gift card at the grocery store, then he suddenly has $50 more in his checking account than he would otherwise have. That cash could be used for anything.

That’s not to say you’re doing the wrong thing. It depends on your child’s financial state and whether they’re actually making positive financial moves and positive career progress.

Q3: Why cosigning is bad idea
I’d love to hear your opinion on this story about a woman with student loans, and her father who cosigned and has to pay for them.

http://www.app.com/article/20130707/NJNEWS/307070017/?nclick_check=1
- Angela

That’s why I discourage everyone from cosigning loans. If the other person on the loan dies unexpectedly, guess who’s going to be holding the bag?

Yes, I know that sometimes you feel like you should co-sign loans, but you do that with a tremendous risk, and when that risk comes calling, it can completely derail the financial stability in your life.

If you want to help your child with school, get a loan you can afford on your own and assume you’re going to be the one paying it.

Q4: Public domain books
Just wanted to share with you and your readers that you can find free electronic versions of pretty much any book ever published before 1920. I’ve been reading all of the novels of Dickens and I’ve read several of the Oz novels to my children and it hasn’t cost a dime.

- Zelda

I do this quite often myself. I’ve read books like The Count of Monte Cristo and Les Miserables for free.

There are a lot of free classics on the Kindle store if you have a Kindle. That process makes it really easy.

If you don’t have a Kindle, you can still download mountains of free books to your computer using Project Gutenberg.

Q5: Old floppy discs
What can we possibly do with old floppy disks? I have about a hundred lying at home since a very long time (obviously). And I do not intend to throw them out without being able to use them?

- Geoff

They’re pretty useless in terms of technology. Computers don’t come with floppy drives any more and it’s getting difficult to even find USB floppy drives. You should seek out other uses for them.

For example, you can turn five of them into a small planter using some glue. A row of these looks surprisingly cool. You can also make a pen holder this way.

I’ve actually used an old floppy as a very effective ice scraper a few years ago. It got me out of a real pinch.

Just make sure you’ve removed all useful data from them first.

Q6: Yard sale price disagreement
My wife and I run a yard sale every weekend we’re at home from April to October (weather permitting). My wife usually does most of the pricing of items, and there’s where we run into trouble because I think she overprices everything. She has old books for $1 and old toys for as much as $5. She had a beat up old lawnmower for $50… the thing looked like it was on its last legs. We have a few regulars who stop by once a month or so but most of our traffic is random people who stop in, seem interested in an item, look at the price, and leave. We’re just not selling what we could, and every time I bring it up, my wife gets upset. Thoughts?

- James

The lower you price items at a yard sale, the more you’re going to sell. The key is to find that sweet spot balance between the two if you want to maximize your money.

Instead of demanding that prices be lowered, just suggest to your wife that you experiment with different prices. Lower all prices by 50% for one weekend and see how the total sales compare to the normal prices. Or lower by 25% and see how that works.

The goal should be to maximize your total revenue. It’s pretty easy to replenish yard sale items, particularly if you have friends with unwanted items that they wish to offload.

Q7: Loan to pay off debt
I am trying to payoff my credit card debt. I owe about $7,000 at about 22%. The high interest is driving me crazy! It occurred to me that I could get a loan at a lower rate, use it to pay off the balance on the cc, and then pay it off. Thru the credit union I am a member of I can get a personal loan at 14.1%. The interest goes down to 7.35% if I leverage my investment account to get a secured loan. I make $65K/year and have no other debt so I can pay the cc balance or the loan (if I take it out) in a few months. It just really bothers me to pay 22% interest! What do you think?

- Bill

This is a perfectly legitimate way to reduce your loan interest, at least in terms of the personal loan.

As for the leveraged loan, that’s really up to you. It does involve collateral, but if it’s an ordinary investment account, you’d be tapping it anyway if you got into significant financial trouble. I’d be okay with that.

I’d be nervous about using collateral that’s something you use all the time, like your home or your car, just to pay down credit card debt. A second mortgage to pay off credit card debt feels like you’re adding personal risk just to save money.

Q8: Life insurance and company failure
What would happen to my life insurance policy should my life insurance company go out of business?

- Marcus

The exact laws vary from state to state, but each state has an insurance department that requires insurance companies in the state to have some form of insurance on their insurance.

What that means is that, in effect, should your company fail, another insurance company would guarantee your policy up to a certain amount (it depends on the state) and very well might just continue your policy (though it’s up to them).

This is a streamlined process – mostly, you’d just hear about it through the mail, explaining what you need to do.

Q9: Figuring out my plan
I am 26 years old and have been living at home since I graduated college in 2010. To make a long story short, the first year I worked I was a total idiot. I made $37,500/year, had no rent or bills other than two loan payments (which cost a total of $500 because I paid the minimum on both) plus I saved practically nothing. Then my situation changed. My parents both got laid off just before I graduated college, but I could see their financial situation was getting more dire as the months and years wore on. They needed more help with the bills, so they started charging me rent ($400/month) plus asked me to pay another student loan of mine because they could no longer afford to pay it (that was another $399/month).

While it was overwhelming at first, it forced me to pay closer attention to my own finances. I looked for (and found) a better paying job, and learned to budget etc. I now make $50K a year. At the beginning of this year, I vowed to build an emergency fund and start to pay my loans down as best I could. I worked out a budget and have an automatic savings plan which takes $200 out of each paycheck- I pretend that money doesn’t exist, I leave it in my savings and don’t touch it, so I am guaranteed to save at least $400/month. Also, after number-crunching, I realized the second paycheck of the month I can save about $300 extra and still manage to have a little disposable income. After doing this from Jan-June, plus adding in my tax return, and putting a little extra aside when I could, I managed to save $4,800 in an emergency fund, plus $1,200 toward a vacation I plan on taking.

Thankfully, my parents both found steady work and were able to get back on their feet, but just before this happened, they had to borrow $3,000 from me. We discussed a repayment plan, and in lieu of getting the $3K back in one lump sum, I told them I would prefer not to pay rent (giving me an extra $400 at my disposal). THIS (finally) leads me to my question…I took the $3K out of my emergency fund. Logically, I should put the $400 back per month until I replenish it, but I was wondering what you thought about this alternative. By the end of this month I will have about $3,000 total in my emergency fund, plus I will still be contributing $400/month with my automatic savings. So, I was thinking about using the “extra” $400 to pay down my student loans. (I have no credit card or any other type of debt). My total loan debt is $37K. I was thinking of doing the “snowball” method of paying it down. I have a $12K loan broken up into 4 different loans at 4 different interest rates (6.8%-$1,700, 6.8%-$1,600, 5.6%-$4,200, 6%-$4,300). I did some calculating on mint.com and if I really commit, I can have my $12K loan paid off in less than two years (that would mean making payments of about $500-600/month). I also plan on using some of my year-end bonus to knock it down. From there, I plan on taking that money and paying off my $25K loan (at a 7.9% interest rate). What are your thoughts? Should I focus on the $25K loan first because it’s a higher interest? Or should I get rid of the $12K so I can get closer to being debt free? Or do you think building my savings is more important? Am I on the right track or totally off base?
- Lily

From what I can tell, $3,000 amounts to somewhere around a month and a half of living expenses for you. Given that you’re single, this is a reasonably good amount for an emergency fund – I usually recommend 1-2 months.

If I were in your shoes, I would feel fine about using that $400 a month and paying down debts with it. I would keep $3,000 as my target amount in my emergency fund, though, and replenish it if it gets below that.

You really don’t want to have less than a month’s worth of living expenses in your emergency fund, as that opens you up to some very sticky situations.

Q10: Dating advice
How did you meet your wife? It seems like you two are a perfect fit. How did you start dating?

- Lynn

I knew my wife from early childhood. We went to the same elementary school, in fact.

We were not in the same grade, however, and our classes didn’t overlap. I mostly knew her because we had a few classes throughout our school years that overlapped and we were in a few of the same extracurricular activities.

However, we did not start dating until we were basically done with high school and attending the same college. We had slowly become closer friends near the end of high school and just decided to give dating a try. It clicked.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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